Requisition of Seized Cash Under Section 132A Allowed from Police Authorities

Requisition of Seized Cash Under Section 132A Allowed from Police Authorities ; Funds to be Deposited in Income Tax Department’s P.D. Account.

Issue:

Whether the Income-tax Department can requisition seized cash under section 132A(1)(c) from police authorities, particularly when the matter is pending before a Magistrate, and if so, how the unaccounted portion of the cash should be handled.

Facts:

An informant initially reported a theft of Rs. 90,000 worth of golden and silver ornaments. Subsequently, he amended his complaint to include the theft of his passport and cash worth Rs. 1.40 crores. The police recovered Rs. 60.29 lakhs and a Swift car worth Rs. 1.75 lakhs (purchased from the stolen money), along with the ornaments. While the informant satisfactorily explained the source of the recovered amount to the police, he failed to provide a satisfactory explanation for Rs. 35.28 lakhs of this recovered cash during interrogation by the Income-tax Department. Consequently, the Income-tax Department issued a warrant of authorization under section 132A(1)(c) to the police inspector for the requisition of the seized cash. However, the police did not accept it as the matter was pending before the Magistrate. The Income-tax Department then approached the Magistrate, who ordered that the Department was free to take all permissible actions, including making a fixed deposit of Rs. 35.28 lakhs in the informant’s name with a Nationalized Bank for an initial period of two years. This order was challenged before the Sessions Court by the Department, requesting permission to deposit the amount in a fixed deposit in the name of the Income-tax Department, but this request was rejected.

Decision:

In favor of the revenue: The Income-tax Department is free to undertake all actions permitted under law regarding the unexplained amount of Rs. 35.28 lakhs. However, instead of making a fixed deposit in the informant’s name, the Department shall deposit the entire amount of Rs. 35.28 lakhs in a P.D. (Personal Deposit) Account in accordance with the provisions and Rules of the Income Tax Act.

Key Takeaways:

Requisition of Seized Assets under Section 132A: Section 132A empowers the Income-tax Department to requisition books of accounts, documents, or assets (including cash) held by any person, including police authorities, if the Assessing Officer has reason to believe that such assets represent wholly or partly income or property that has not been, or would not be, disclosed.
Magistrate’s Role in Seized Property: When property is seized by police and involved in criminal proceedings, the Magistrate’s court has jurisdiction over its custody. However, the Income-tax Department can approach the Magistrate for directions regarding the release or handling of such assets for tax purposes, especially if there’s an unexplained portion.
Department’s Right to Act on Unexplained Money: If an individual fails to provide a satisfactory explanation for the source of cash or other valuable articles to the Income-tax Department, it can be treated as unexplained money, and appropriate tax proceedings can be initiated.
Custody of Requisitioned Funds: The ruling clarifies that when the Income-tax Department requisitions unexplained funds, they are to be held in a P.D. Account as per income tax rules, rather than in a fixed deposit in the name of the person from whom they were recovered, especially if the source remains unsatisfactory to the tax authorities. This allows the Department to retain control over the funds while assessment proceedings are underway.
Pendency of Criminal Proceedings: The pendency of criminal proceedings (e.g., theft case) does not automatically bar the Income-tax Department from initiating parallel proceedings under the Income-tax Act concerning the unexplained nature of the seized funds.

HIGH COURT OF GUJARAT

Deputy Director of Income-tax

State of Gujarat

DIVYESH A. JOSHI, J.

R/SPECIAL CRIMINAL APPLICATION NO. 5786 of 2024

APRIL 30, 2025

Varun K. Patel, Adv. for the Applicant. Bhargav Pandya, APP and Amit N. Chaudharyfor the Respondent.

JUDGMENT

1. Rule. Learned APP, Mr. Bhargav Pandya for respondent nos.1 and 3 and learned advocate, Mr. Amit Chaudhary for respondent no.2 waive service of notice of rule.

2. By filing instant petition under Articles 226 and 227 of the Constitution of India, under Sections 451 and 457 of the Code of Criminal Procedure, 1973 an under Sections 132 and 132A of the Income Tax Act, the petitioner has prayed for quashing and setting aside the order dated 10.08.2023 passed by the learned Additional Chief Judicial Magistrate, Sabarkantha at Pranjit and the order dated 18.10.2022 passed by the learned Principal Senior Civil Judge & Chief Judicial Magistrate Sabarkantha at Pranjit and thereby prayed for allowing the application preferred by the petitioner — Income Tax Department to requisition muddamal cash amount of Rs.35,28,000/-.

3. The brief facts leading to filing of the present petition are as under,

3.1

The respondent no.2 herein has lodged FIR being C.R. No.11209041220120/2022 with Pranjit Police Station, Sabarkantha for the offences under Sections 454 and 380 of the Indian Penal Code on 02.02.2022 alleging inter alia about the theft of golden chain worth of Rs.70,000/-, silver ring worth of Rs.20,000/- totalling to Rs.90,000/-.

3.2

On 27.02.2022, after registration of the aforesaid FIR, the respondent no.2 had paid visit at the police station concerned and informed about stealing of his passport and cash worth of Rs.1,40,00,000/

3.3

Pursuant to registration of the aforesaid FIR, the investigation was put into motion and the accused persons were arrested and accordingly, search and seizure was made by drawing necessary panchnama.

3.4

During the course of investigation, the police has recovered Rs.60,29,000/- and Swift Car worth of Rs.1,75,000/- purchased from the stolen rupees out of total Rs.1,40,00,000/-as also golden and silver ornaments.

3.5

However upon making inquiry from the respondent no.2 with regard to the amount of Rs.1,40,00,000/- lying in the house of the respondent no.2, which was stolen by the accused, explanation was given by the respondent no.2, which was satisfactory reply.

3.6

Therefore on 24.03.2022, the Police Inspector of Prantij Police Station wrote a letter to the Director, Income Tax (Investigation), Ahmedabad for carrying out necessary inquiry with regard to the cash amount lying in the house of the respondent no.2.

3.7

In pursuant to the aforesaid communication, the respondent no.2 and others were called for interrogation and their statements were also recorded, however, the respondent no.2 has failed to give proper explanation with regard to source of cash of Rs.1,40,00,000/-including seized cash of Rs.35,28,000/-.

3.8

Therefore, the petitioner issued warrant of authorization under Section 132A(1)(c) of the Income Tax Act to the Police Inspector, Pranjit Police Station for requisition of seized cash, however, the said warrant was not accepted by the Police Inspector as the matter is pending before the learned Magistrate.

3.9

Thereafter, the petitioner appeared before the court of learned Magistrate through Special Public Prosecutor and upon request being made by the department, the learned Magistrate passed an order on 18.10.2022 holding that the Income Tax Department is free to take all actions permissible under the law including to make fixed deposit of Rs.35,28,000/- in the name of the complainant i.e. the respondent no.2 herein with any Nationalize Bank initially for a period of two years renewable from time to time.

3.10

Pursuant to the aforesaid order, the petitioner submitted an application before the court of learned Magistrate on 13.02.2023 inter alia praying for permission to allow them to deposit the aforesaid amount in a fixed deposit in the name of the Income Tax Department.

3.11

However, the learned Magistrate, by impugned order dated 10.08.2023, rejected the said application preferred by the petitioner.

3.12

It is required to be noted that in the meantime, quashing petition being Criminal Misc. Application No.8266/2022 came to be filed by the accused on the ground of settlement and the said quashing petition was allowed and the aforesaid FIR has been quashed.

4. Heard learned advocate, Mr. Varun Patel for the petitioner, learned APP Mr. Bhargav Pandya for the respondent nos.1 and 3 and learned advocate, Mr. Amit Chaudhary for the respondent no.2.

5. Learned advocate, Mr. Varun Patel appearing for the petitioner has referred to the facts of the case and submitted that on the strength of the registration of the FIR lodged by the respondent no.2 herein with regard to theft of silver and golden ornaments worth of Rs.90,000/-, the investigation was put into motion, however subsequently, the respondent no.2 herein had come with a case of theft of passport and cash amount of Rs.1,40,00,000/- and during the course of investigation, the police has recovered Rs.60,29,000/- and Swift Car worth of Rs.1,75,000/- purchased from the stolen rupees. He further submitted that thereafter, the Police Officer of Prantij Police Station wrote a letter to the petitioner — department for carrying out inquiry with regard to the cash lying in the house of the respondent no.2 herein and pursuant thereto, necessary inquiry was carried out by calling the respondent no.2 and in the said interrogation, the respondent no.2 has failed to explain the source of Rs.35,28,000/- out of total amount of Rs.1,40,00,000/- and thus the said amount remained unexplained and unaccounted within the provision of Section 132A(1)(c) of the Income Tax Act and accordingly, the said amount was seized and lying in the custody of the police station as muddamal.

6. Learned advocate submitted that the petitioner — department had issued warrant of authorization under Section 132A(1)(c) of the Income Tax Act to the Police Inspector, Prantij Police Station for requisition of seized cash, however, the said warrant was not accepted by the police in view of the pendency of the trial before the learned Magistrate concerned, therefore, the petitioner — department appeared before the learned Magistrate concerned and after hearing the submissions canvassed on behalf of the petitioner — department, the learned Principal Senior Civil Judge, Prantij, by an order dated 18.10.2022, was pleased to hold that the Income Tax Department is free to take all actions permissible under the law with a direction to make fixed deposit of Rs.35,28,000/- in the name of the respondent no.2 with any Nationalized Bank. He, however, submitted that though the said order was passed, there is no mechanism for fixing the cash amount in fixed deposit and the requisition is condition precedent for initiating the steps under the Income Tax Act.

7. Learned advocate submitted that in fact, against the impugned order, the respondent no.2 had preferred Revision Application before the learned Sessions Court inter alia praying for release of the muddamal in his favour, however, now it has been withdrawn. He, however, submitted that it is the petitioner — department, who is entitled to keep the amount with them and not by the respondent no.2 herein. At this stage, learned advocate has relied upon the order dated 18.01.2018 passed by the Coordinate Bench of this Court in Special Criminal Application No.10055/2017 (in case of Vipul Chavda v. State of Gujarat [2018] 90 (Gujarat)), which was subsequently modified by an order dated 29.06.2018 passed in Criminal Misc. Application No.1/2018 in Special Criminal Application No.10055/2017. Referring to the said order, it is submitted that the Coordinate Bench of this Court has considered the provision of the Income Tax Act as also various decisions of the Hon’ble Supreme Court as well as other High Courts and directed the concerned Investigating Officer to handover the muddamal currency notes to the Income Tax Department, who is free to undertake all the actions permitted under the law. He submitted that however as stated above, criminal misc. application was filed for some clarification, which was allowed by the Coordinate Bench and directed to deposit entire amount in P.D. Account and the said practice is required to be adopted in other cases also. He submitted that at the time of preferring an application before the learned Judge concerned, earlier order dated 18.01.2018 was placed on record and pointed out that the petitioner — department is facing serious problem to keep the said amount in fixed deposit in the name of the original complainant and because of passing order as stated above, it is practically impossible on the part of the department to keep the amount in fixed deposit in the name of the respondent no.2, therefore, present application is preferred. He further submitted that however as stated above, by impugned order, though the petitioner — department is permitted to take all actions permissible under the law with a direction to make fixed deposit of Rs.35,28,000/- in the name of the respondent no.2 with any Nationalized Bank, which is against the order passed by the Coordinate Bench of this Court. It is, therefore, urged that the present petition may be allowed and the petitioner — department may be permitted to deposit the entire muddamal amount in P.D. Account.

8. On the other hand, learned advocate, Mr. Amit Chaudhary appearing for the respondent no.2 has opposed the present petition and submitted that in fact, the petitioner — department is not entitled to retain the muddmal cash amount with them as it is an admitted position of fact that the respondent no.2 is the owner of the said muddamal and on the basis of the registration of the FIR, the investigation was commenced and during investigation, the said amount has been recovered from the accused persons, therefore being an owner of the muddamal, the respondent no.2 is entitled to get the custody of the said muddamal. He further submitted that for the return of the amount, the respondent no.2 had preferred revision application before the learned Sessions Court but as the present petition is pending before this Hon’ble Court, therefore, it was withdrawn. He submitted that the order of the learned Magistrate is passed under Section 452 of the CrPC, therefore as per the provision of Section 454 of the CrPC, Revision Application was preferred before the learned Sessions Court as stated above, wherein notice was issued upon the petitioner — department and on service of the same, the petitioner — department appeared before the learned Sessions Judge and informed about filing of the present petition and just because of that reason, the said revision application was withdrawn. He further submitted that in fact, there is alternate remedy available under the law, which the petitioner — department ought to have availed, however if the present petition is allowed, in that event, right of preferring appeal by the respondent no.2 would be frustrated. It is, therefore, urged that the present petition may not be entertained.

9. Having heard learned advocates for the parties and having gone through the material available on record including the provision of the law, the question, which would fall for consideration of this Court is as to whether the the petitioner — department can be permitted to undertake all the actions permitted under the law by keeping the entire amount in PD Account.

10. Before considering the facts of the case coupled with the submissions canvassed by learned advocates for the parties, I would like to rely upon the decision of the Coordinate Bench of this Court in case of Vipul Chavda (supra) upon which reliance has been placed by learned advocate for the petitioner, wherein the Coordinate Bench of this Court has considered the maintainability of the petition before this Court, the provision of the Income Tax Act as also decisions of the Hon’ble Supreme Court as well as other High Courts and allowed the Income Tax Department to undertake all actions available under the law. Relevant paragraphs of the said decisions are produced hereunder,

“11. I am not impressed by the preliminary objection raised on behalf of the respondent No.2 as regards the maintainability of this application under Article 227 of the Constitution of India on the ground that the impugned order is revisable and, therefore, a revision application should have been filed. It is always open for this Court, in exercise of its supervisory jurisdiction under Article 227 of the Constitution of India, to look into the legality and validity of an order passed by the Magistrate. In such circumstances, I overrule the preliminary objection. I would like to examine the matter on merits rather than rejecting this application and asking the department to file a revision application before the Sessions Court.

12. Under Section 132 of the Income Tax Act, on a requisition being made under Sub-section (I), the officer or authority referred to in Clause (a) or Clause (b) or Clause (c), as the case may be, of the subsection shall deliver the books of account, other documents or assets to the requisitioning officer either forthwith or when such officer or authority is of the opinion that it is no longer necessary to retain the same in his or its custody. Once the warrant of authorization is issued against any person, then the seized amount is required to be retained by the Income Tax Authority and without taking over of the said amount, no further proceedings can be started against any person, from whose custody the amount was recovered. The Lower Court has not properly appreciated the provisions of Section 132 of the Income Tax Act and rejected the claim of the applicant.

13. In the case of Parasnath v. Union of India & Ors., reported in 1997 (225) ITR 365. The Apex court has held as under :-

“(i)

The Criminal Court had no authority to order handing over of property, i.e. jewellery or cash to persons claiming it.

(ii)

xxx xxx xxx

(iii)

xxx xxx xxx

(iv)

Once an assessment is over the seized property is to be disposed of as per the determination made by the assessing authority.

(v)

Where assessment is not complete the authority issuing the warrant shall take further steps within the stipulated period as required under Section 132 (5) of the Act.”

14. In the case of Lalit Bisnoi v. State of Gujarat, Criminal Revision Application No. 77 of 2015, decided on 31st July, 2015, a Coordinate Bench of this Court dealt with an identical issue and has held as under;

“8. It would be profitable to reproduce section 132A of the Act, which reads as under :

132A : Powers to requisition books of account, etc.

(1) Where the Director General or Director or the Chief Commissioner or Commissioner, in consequence of information in his possession, has reason to believe that-

(a)

any person to whom a summons under subsection (1) of section 37 of the Indian Income-tax Act, 1922, or under sub-section (1) of sec. 131 of this Act, or a notice under subjection (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents, as required by such summons or notice and the said books of account or other documents have been taken into custody by any officer or authority under any other law for the time being in force, or

(b)

any books of account or other documents will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act and any person to whom a summons or notice as aforesaid has been or might be issued will not or would not produce or cause to be produced, such books of account or other documents on the return of such books of account or other documents by any officer or authority by whom or which such books of account or other documents have been taken into custody under any other law for the time being in force, or

(c)

any assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purposes of the Indian Income-tax Act, 1922, or this Act by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force. then, the Director General or Director or the Chief Commissioner or Commissioner may authorise any Deputy Director, Deputy Commissioner, Assistant Director [Assistant Commissioner or Income-tax Officer] (hereafter in this section and in sub-section (2) of section 278D referred to as the requisitioning officer) to require the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, to deliver such books of account, other documents or assets to the requisitioning officer.

(2) On a requisition being made under subsection (1), the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, of that sub-section shall deliver the books of account, other documents or assets to the requisitioning officer either forthwith or when such officer or authority is of the opinion that it is no longer necessary to retain the same in his or its custody.

(3) Where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of sub-sections (4A) to (14) (both inclusive) of section 132 and section 132B shall, so far as may be, apply as if such books of account, other documents or assets had been seized under sub-section (1) of section 132 by the requisitioning officer from the custody of the person referred to in clause (a) or clause (b) or cl. (c), as the case may be, of sub-section (1) of this section and as if for the words “the authorised officer” occurring in any of the aforesaid sub-sections (4A) to (14), the words “the requisitioning officer” were substituted.

9. The provision of section 132A provides for the authority prescribed in the said provision in consequence of information in his possession has reason to believe that any person has omitted or failed to produce such books of account or other documents as required by the summons issued under sub-section (1) of section 37 or sub-section (1) of section 131 or sub-section (4) of section 22 or subsection (1) of section 142 of the Act.

1. It further requires the officer or authority to deliver such books of account, other documents or assets to the requisitioning officer.

2. Section 132A(1)(c) provides that in consequence of the information in his possession, if the officer has reason to believe that any assets represent either wholly or partly income or property which has not been or would not have been disclosed for the purpose of Income-tax Act, 1922, by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force, the request can be made and such authority or officer shall deliver the books of account, other documents and assets to the requisitioning officer either forthwith or if the authority is of the opinion that it is no longer necessary to retain in his custody.

3. It is pertinent to note that the Court while denying the request of the Incometax Department on the ground that no summons so far has been issued nor any search was commenced, failed to notice the provision of section 132A(1)(c), which permits requisition on the officer having reason to believe that any asset represent either wholly or partly income or property which has not been disclosed for the purpose of Income-tax Act by any person from whose possession or control, such assets have been taken into custody by any officer or authority under any other law for the time being in force may require such authority to deliver such books of account, other documents or assets to the concerned offices. The requisition for currency notes when is made by the competent authority, the currency notes are required to be placed at the disposal of the Income-tax Department for processing further under the Income-tax Act. The authority concerned also has powers to frame assessment under section 153 and 153A of the Act, which provide for time limit for completion of assessment and reassessment. As rightly pointed out, section 153A permits the authority to assess or reassess the total income of six assessment years, immediately preceding the assessment year relevant to the previous year, when the search is made under section 132 books of account, requisition under section 132A after the 31st day of May, 2003. Shri M.M. Bhatt, learned Senior Counsel appearing for the applicant-Department is right in pointing out that any further delay caused would hamper the right of the concerned authority of assessing or reassessing the total income of the assessee of earlier years and that may also cause loss of required material and may have bearing on collection of tax causing substantive loss to the Revenue, if eventually the liability is saddled.

10. Reference would be necessary to the case of Deputy Director of Income-tax v. State of Gujarat (supra), wherein this Court has held that there is no power with the Police Authority to withhold the currency notes. Once the police seizes the currency notes and informs the Income-tax Department, the requisition has to be made. The Court has also held that the inquiry under section 451 of the Code of Criminal Procedure and one under section 132A of the Act are quite different. There are limited powers under section 451 of the Code of Criminal Procedure, whereas under section 132A of the Act, a specific provision is made for such purpose. Before the High Court, the case was of stealing of cash of Rs.42.50 lakh and the employee of the concerned complainant was arrested from whom such amount of Rs.42.50 lakh was seized. The intimation was given by the police officer to the Income-tax Department to approach the trial Court to initiate the proceedings. The complainant also moved before the trial Court for getting the currency notes and the Deputy Director of Income-tax submitted an application to hand over the currency notes to complete the proceedings initiated by the Incometax Department against the respondent.

1. The trial Court had rejected the application filed by the Deputy Director of Income-tax Department and handed over the currency notes of Rs.30 lakh to the complainant on his furnishing surety and directed the police to retain the amount of Rs.12 lakh in its custody. The Department was also directed to complete the proceedings within 15 days under intimation to the Court if any income-tax liability was accruing to the Department and to pass necessary order. It was directed that in the event of any tax liability accruing to the Department, the respondent would pay the same immediately under the intimation of the Court. Warrant of authorisation was served upon the police and it was though informed of the Revision Application being pending before the Court, the police handed over the currency notes to the complainant, relying upon the order passed by the trial Court.

2. This Court allowed the application of the tax authority on the ground that the question of huge currency notes was involved and if proceedings of inquiry under section 132A of the Act were initiated, the truth would come out before the Income-tax Department regarding the genuineness of the muddamal currency notes seized. It also held and observed that the police authority has no power to retain the cash nor does it have any power to hand over such cash to the complainant. It is incumbent upon the police to hand over the cash to the Department for completion of proceedings initiated by the Department. It was also held that the trial Court also was not right in directing handing over currency notes to the complainant when the proceedings were already initiated by the Department under section 132A of the Act. Accordingly, the order was quashed and set aside.

11. In the subsequent decision of this Court rendered in the case of Shankarlal Mangilal Kulthe (supra), the aforesaid decision was followed by this Court, wherein the respondent was facing the accusation under section 124 of the Bombay Police Act. He was found carrying cash currency notes of Rs.5.90 lakh. When the matter was pending before the concerned Magistrate, the Income-tax Department had sought the custody of such currency notes. Believing the amount was assessable to tax in the hands of the person concerned, their application for interim custody was granted and at the conclusion of the trial, the interim order was made absolute.

11.1 The respondent-accused challenged the same before the Sessions Court by preferring an appeal and Revision Application. Both the proceedings were allowed setting aside the order passed by the Magistrate handing over custody of the currency notes to the Income-tax Department. The Appellate Forum also directed the learned Magistrate to hold inquiry in terms of provisions of the CrPC and to pass final order in respect of such muddamal article. The Income-tax Department had pitched its case on the strength of the provision of section 132A of the Act, under which the requisition for currency notes was made by the competent authority. This Court held that under section 132A of the Income-tax Act, the competent authority if has reason to believe inter alia that any assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purpose of the Income-tax Act, by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force, may require such authority to deliver such books of account, other documents or assets to the concerned officer. In exercise of such powers, when the order of requisitioning cash currency was passed, the learned Magistrate correctly placed the currency notes at the disposal of the Income-tax Department for further process in terms of Incometax Act, including for assessment under section 153, if found necessary. While so holding, reliance is placed on the decision of this Court in the case of Deputy Director of Income-tax (Investigation) v. State of Gujarat (supra).

11.2 The Court also held that there is no rival claims with respect to such currency notes or other valuable assets. While holding that the learned Sessions Judge committed error in interfering with the order passed by the learned Magistrate, it further directed that in the case of rival claims, if ultimately the Income-tax Department does not require the currency notes for its purpose, the same would have to be placed at the disposal of the learned Magistrate for passing appropriate orders under section 452 of the Code of Criminal Procedure.

12. Chapter XXXIV of the CrPC under the heading of Disposal of Property provides for the order for custody and disposal of property pending trial and at the time of conclusion of the trial. In the present case, the provision of section 451 of the Code of Criminal Procedure is invoked which provides for handing over custody of the muddamal pending the trial and section 457 provides for procedure by the police upon seizure of muddamal. It is apt to reproduce at this stage, section 451 of the Code of Criminal Procedure, which reads as under : 451. Order for custody and disposal of property pending trial in certain cases. When any property is produced before any Criminal Court during any inquiry or trial, the Court may make such order as it thinks fit for the proper custody of such property pending the conclusion of the inquiry or trial, and, if the property is subject to speedy and natural decay, or if it is otherwise expedient so to do, the Court may, after recording such evidence as it thinks necessary, order it to be sold or otherwise disposed of. Explanation.-For the purposes of this section, “property” includes- (a) property of any kind or document which is produced before the Court or which is in its custody, (b) any property regarding which an offence appears to have been committed or which appears to have been used for the commission of any offence.

13. At this juncture, it would be relevant to refer to the decision of the Apex Court in the case of Sunderbhai Ambalal Desai v. State of Gujarat, reported in AIR 2003 SC 638, wherein the Apex Court has held and observed as under : Valueable Articles and Currency Notes :

11. With regard to valuable articles, such as, golden or silver ornaments or articles studded with precious stones, it is submitted that it is of no use to keep such articles in police custody for years till the trial is over. In our view, this submission requires to be accepted. In such cases, Magistrate should pass appropriate orders as contemplated under Section 451, Cr. P.C. at the earliest.

12. For this purpose, if material on record indicates that such articles belong to the complainant at whose house theft, robbery or dacoity has taken place, then seized articles be handed over to the complainant after :-

(1) preparing detailed proper panchnama of such articles;

(2) taking photographs of such articles and a bond that such articles would be produced if required at the time of trial; and (3) after taking proper security.

13. For this purpose, the Court may follow the procedure of recording such evidence, as it thinks necessary, as provided under Section 451, Cr. P.C. The bond and security should be taken so as to prevent the evidence being lost, altered or destroyed. The Court should see that photographs of such articles are attested or countersigned by the complainant, accused as well as by the person to whom the custody is handed over. Still however, it would be the function of the Court under Section 451, Cr. P.C. to impose any other appropriate condition.

14. In case, where such articles are not handed over either to the complainant or to the person from whom such articles are seized or to its claimants, then the Court may direct that such articles be kept in bank lockers. Similarly, if articles are required to kept in police custody, it would be open to the SHO after preparing proper panchnama to keep such articles in a bank locker. In any case, such articles should be produced before the Magistrate within a week of their seizure. If required, the Court may direct that such articles be handed over back to the Investigating Officer for further investigation and identification. However, in no set of circumstances, the Investigating Officer should keep such articles in custody for a longer period for the purpose of investigation and identification. For currency notes, similar procedure can be followed.

14. Whenever the seizure of property is reported by any police officer to the learned Magistrate under the provisions of the Code of Criminal Procedure and such property is not produced before the Criminal Court during inquiry or trial, the Magistrate may make such order for disposal or delivery of such property to the person entitled to the possession thereof or if such person cannot be ascertained, respecting the custody and production of such property. If the person so entitled is known, the property can be delivered on such condition as the learned Magistrate may think fit and even if such person is unknown, the Magistrate may detain it and necessary procedure shall be followed as provided under the said section. When any property is produced before the Criminal Court during an inquiry or trial, the Court may make such order as it thinks fit for the proper custody of such property pending the conclusion of the inquiry or trial and if property is subjected to natural and speedy decay and/or otherwise it is expedient to do so, the Court may dispose of after recording such evidence as may be necessary.

15. Under the heading of ‘valuable muddamal article and the currency notes’, it is made obligatory upon all the Courts trying the criminal cases to expeditiously and judiciously exercise the powers under section 451 for the custody and disposal of the property. On account of occurrences of theft and misappropriation, so also of irreversible damage to the property, the Apex Court was thoroughly concerned and directed expedient steps to be taken by the concerned Court. It is also further directed that wherever such property is required for the purpose of trial, under which circumstances, the Court can photograph them or video record the muddamal. IT has also required that when valuables are not handed over to the applicant or complainant, the same be directed to be kept in a bank locker. In no circumstances either for identification or investigation it is to be kept with the Investigating Officer. The very procedure is prescribed for currency notes as well.

16. In such a background, the aspect that requires consideration is as to whether the cash of Rs.8.10 crore would be necessary to be produced as muddamal of bribe or otherwise at the time of trial. It is the case of the prosecution that to save some of the respondents who have enormous following, being religious heads, this huge amount of Rs.8.10 crore was arranged for bribing the Investigating Agency. It is nowhere coming on record that any trap was organised that the Court may require the detailed number of series of currency notes, which also in any case at the time of panchnama, the police ought to have done. Even if it is not done, it would not be difficult to so do it and the amount cannot continue to lie with the Investigating Officer. The Court in the alternative also could have thought of placing it in the Fixed Deposit or the bank locker with any Nationalised Bank for the purpose of safety and security of the currency notes. There is no purpose worth the name that would be served if the amount continues to lie with the Investigating Officer. This being a law on the interim custody during the pendency of the trial, the vital question that is addressed by this Court is the one raised by the applicant-Department being the claimant under the provision of law which has reason to believe that the amount is unaccounted money and is liable for investigation under the Income-tax Act and Rules framed thereunder, the warrant of authorisation is issued and the same is found to be sustainable by this Court.

17. The learned trial Judge when observed that the seized amount pertained to bribe money and it was required to be preserved, it neither had regarded the provision of section 451 of the CrPC nor the law laid down on the subject, as discussed hereinabove, nor did it consider the relevant provisions of Income-tax Act and the pronounced authorities on the subject while denying such requisition to the applicantDepartment. The Investigating Agency was also not right in contending that the custody of this muddamal article is necessary till completion of the trial when even otherwise, the production of the same through panchnama or exhibiting the same by virtue of video recording of same could have been managed.”

15. In the case of Uday Navinchandra Sangani v. Vikrant Pal Singh, Special Criminal Application No. 58 of 2015, decided on 20.01.2015, a learned Single Judge of this Court, has held as under;

“[21] Now, so far as the contention of the learned advocate for the petitioner with regard to the provisions of Section 132A of the Act is concerned, from the record it appears that the respondent No.1 herein as a Deputy Director of Income Tax (Investigation), Unit 3, Surat, had filed the application under Section 132A of the Act. The concerned authority of the Income Tax Department authorized the respondent No.1 to initiate the aforesaid proceedings. In the affidavit filed on bahalf of respondent No.1, it is specifically stated that based on the information made available and after causing necessary inquiry the competent authority under the Income Tax Act was satisfied about the ingredients of Section 132A of the Act to the effect that the contents of 42 gunny bags relate to transactions not recorded in the books of account. It is further stated in the affidavit by the respondent No.1 that the authorization under Section 132A of the Act is not under challenge in the present proceedings. Thus, whether there was adequate material for the competent authority to form the required satisfaction either under Section 132 or Section 132A of the Act is not a question which can be agitated by any assessee. This Court in the decision rendered in the case of Sunil Vidhyasagar Gat (supra) has held that Whether on the information in his possession the authority should exercise his powers under Section 132A, must be decided by the authority and not by the High Court. The concerned authority under Section 132A alone is entrusted with the powers to administer it. If from the material disclosed it may be prima facie said that he had reason to believe that any of those conditions existed, it is not open to the High Court, exercising powers under Article 226 of the Constitution, to set aside the warrant of authorization on a reappraisal of the evidence.

[22] This Court in the decision rendered in the case of Deputy Director of Income Tax (Investigation) (supra) observed in para 14, 15 and 16 as under:

14. This Court is now required to see whether the applicant was entitled for custody of muddamal seized by the police for completion of proceedings initiated by the Department or not. Section 132 of the Act would be relevant in this respect. Section 132 stipulates that, on a requisition being made under sub-section (1), the officer or authority referred to in Clause (a) or Clause (b) or Clause (c), as the case may be, of the subsection shall deliver the books of account, other documents or assets to the requisition officer either forthwith or when such officer or authority is of the opinion that it is no longer necessary to retain the same in his or its custody.

15. Under Section 451 of the Code, the Criminal Court has limited power to make inquiry. However, the Court has no power to go in detail and hence, specific provision is made in the Act under Sec.132-A once the proceedings is initiated by the Department. Under Section 132-A of the Act, neither the Court nor the Police Authority has the power to release the currency notes. Hence, scope of inquiry under Sec.451 of the Code as also under Sec.132-A of the Act is quite different.

16. The intention of the Legislature by incorporating Section 132 of the Act is only to protect the interest of revenue of the State and if authority is satisfied regarding the source of income, it may pass appropriate order to hand over the muddamal to the assessee or any concerned person. When question of huge currency is involved and if proceedings of inquiry under Sec.132-A of the Act are initiated, then certainly truth will come before the the Department regarding genuineness of the muddamal seized.

[23] Further, this Court, vide order dated 07.10.2010 rendered in Special Criminal Application No.1009 of 2010, observed as under: Under Section 132A of the Income Tax Act, the competent authority if has reason to believe inter alia that any assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purposes of the Indian Income Tax Act, by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force, may require such authority to deliver such books of accounts, other documents or assets to the requisitioning officer. In exercise of this power, the order for requisitioning cash currency was passed. Learned Magistrate, therefore, correctly placed the currency notes at the disposal of the Income Tax Department for further process in terms of Income Tax Act including for assessment under Section 153, if so found necessary.

[24] Similar view is also taken by this Court in Criminal Revision Application No.333 of 2013. In another case, this Court, vide order dated 24th April 2014 passed in Special Criminal Application No.2499 of 2013, observed in para 6 as under:

6 Having heard learned counsels for the parties, considering the provisions of Sections 132A(2), 132B and 153A of the Income Tax Act, 1961 and the case relied by the learned Senior Advocate for the applicant Department, I am of the view that the impugned order is contrary to the provisions of the Income Tax Act, 1961 and currency notes seized by the police during the search and seizure in exercise of powers under Prohibition of Gambling Act, deserves to be handed over to the Income Tax Department. Accordingly, order dated 28.06.2013 passed by the learned Metropolitan Magistrate, Court No.22, Ahmedabad in Misc. Application No.108 of 2013 is hereby quashed and set aside and the Incharge Police Officer of Ellisbridge Police Station, Ahmedabad shall hand over muddamal being currency notes of Rs.4,78,356/- and Rs.36,30,990/- to the concerned officer of the petitioner department.

[25] Thus, in view of the decisions rendered by this Court in the aforesaid cases, the respondent No.1 herein Income Tax Department is entitled to get the custody of Muddamal 42 gunny bags.”

16. In view of the settled position of law, I am of the view that the impugned order passed by the court below deserves to be quashed.

17. In the result, this application succeeds and is hereby allowed. The order passed by the J.M.F.C, Kathor below Exh.3 is hereby quashed and set aside. It is declared that the department is entitled to retain the cash till the final conclusion of the proceedings under the Income Tax Act. The Investigating Officer is permitted to handover the Muddamal currency notes amounting to Rs.13,00,000/- (Thirteen Lakh) to the applicant-Deputy Director of Income Tax (Investigation), Unit-II, Surat at the earliest. It is clarified that prior to handing over the Muddamal currency notes, the Investigating Officer shall get the videography of the currency notes done as provided in the decision in the case of Sunderbhai Ambalal Soni v. State of Gujarat, AIR 2003 SC 638, and if necessary, to carry out the Panchnama with the serial numbers of the currency notes, if not already done. A copy of the Panchnama or the videography be placed before the court concerned and the same shall be furnished to the Income Tax Department so also to the respondent No.2-original first informant.

18. The applicant-department shall be free to undertake all actions permitted under the law, however, he shall make the Fixed Deposit of the entire amount of Rs.13,00,000/- with any Nationalized Bank within a period of four weeks from the date of taking over such Muddamal currency notes, initially for a period of two years and, thereafter, the same shall be renewed from time to time till the finalization of such proceedings initiated by the applicant-department. Any appropriation, if, is to be made, the same shall be made only with the prior permission of this Court. Rule is made absolute to the aforesaid extent.”

11. After passing of the aforesaid order, Criminal Misc. Application was preferred for some modification and/or clarification on the ground that the requisitioned assets are to be dealt with in the accordance with the statutory provisions as contained in Section 132(4A) to Section 132(14) of the Income Tax Act and there is no provision to make a fixed deposit and considering the submissions canvassed on behalf of the department, Paragraph No.16 of the aforesaid order as replaced as under,

“The applicant department shall be free to undertake all actions permitted under the law, however, he shall deposit the entire amount of Rs.13 lac in the P.D. Account in accordance with the provisions and Rules of the Income Tax Act within a period of four weeks from the date of the receipt of this order.”

12. Thus from the above, it transpires that earlier it was ordered that the department is entitled to retain the cash till final conclusion of the proceedings under the provision of the Income Tax Act but subsequently, it was modified and ordered that the department shall be free to undertake all actions permitted under the law and shall deposit the entire in the P.D. Account in accordance with the provisions and Rules of the Income Tax.

13. Now coming back to the facts of the case, it is found out that the respondent no.2 herein, who is the first informant, has lodged an FIR before the police station for the theft committed by the accused in his house for the golden and silver ornaments worth of Rs.90,000/-, however subsequently, the respondent no.2 informed about the theft of his passport and cash worth of Rs.1,40,00,000/- and accordingly, the investigation was carried out and during the investigation, the police has recovered Rs.60,29,000/- and Swift Car worth of Rs.1,75,000/- purchased from the stolen rupees out of total Rs.1,40,00,000/- as also golden and silver ornaments, to which, interrogation of the respondent no.2 was done, wherein he gave satisfactory reply to the police authority, however when the interrogation by the petitioner — department was made, the respondent no.2 has failed to give satisfactory explanation for an amount of Rs.35,28,000/-, which is the disputed amount in the present case. Therefore, the petitioner issued warrant of authorization under Section 132A(1)(c) of the Income Tax Act to the Police Inspector, Pranjit Police Station for requisition of seized cash, which was not accepted as the matter is pending before the learned Magistrate, therefore, the petitioner appeared before the court of learned Magistrate and upon request being made by the department, the learned Magistrate passed an order on 18.10.2022 holding that the Income Tax Department is free to take all actions permissible under the law including to make fixed deposit of Rs.35,28,000/- in the name of the complainant i.e. the respondent no.2 herein with any Nationalize Bank initially for a period of two years renewable from time to time, however, the said order was challenged before the learned Sessions Court inter alia praying for permission to allow them to deposit the aforesaid amount in a fixed deposit in the name of the Income Tax Department, however, the said request has been rejected by impugned order.

14. However considering the facts of the case, it is found out that the case of the petitioner — department is squarely covered by the decision of the Coordinate Bench of this Court, whereby the petitioner — department is allowed to deposit the entire amount in the PD Account in accordance with the law. Therefore, I am of the considered opinion that the present application deserves to be allowed.

15. In the result, the present petition is allowed. The order dated 10.08.2023 passed by the learned Additional Chief Judicial Magistrate, Sabarkantha at Pranjit and the order dated 18.10.2022 passed by the learned Principal Senior Civil Judge & Chief Judicial Magistrate Sabarkantha at Pranjit are hereby quashed and set aside. Accordingly, the petitioner — department is free to undertake all actions permitted under the law, however, he shall deposit the entire amount of Rs.35,28,000/- in the P.D. Account in accordance with the provisions and Rules of the Income Tax Act within a period of four weeks from the date of the receipt of this order. Therefore, the concerned Investigating Officer is hereby directed to handover the cash amount of Rs.35,28,000/- to the petitioner department after following due procedure of law. It is clarified that prior to handing over the muddamal currency notes, if necessary, the Investigating Officer shall carry out the Panchnama with the serial numbers of the currency notes, if not already done. A copy of the Panchnama, if carried out, be placed before the court concerned and the same shall be furnished to the Income Tax Department so also to the respondent No.2-original first informant.

16. Rule is made absolute to the aforesaid extent. Direct service is permitted.